Insincere Promises

DRAFT Please do not cite or circulate. Insincere Promises: The Law of Misrepresented Intent by Ian Ayres & Gregory Klass To Oliver Wendell Holmes Jr., whose seemingly conflicting views on this topic spurred us to write this book ii Preface This book began in our experience studying and teaching first-year Contracts. The results of many canonical cases – from Red Owl and Peeveyhouse to Bailey and Lefkowitz – seemed to turn at least in part on the whiff of misrepresented intent. But our contracts and torts professors and the casebooks they assigned gave short shrift to the tort of promissory fraud (not to mention the crime of false promise). This book is an attempt to revive scholarly thinking about an area of the law of contracts that is much litigated but little theorized. We also hope to provide practical advice on the contours of the doctrine, both for advocates and for judges, who must struggle to put the law’s condemnation of promissory insincerity into practice. Readers who are impatient for the real-world payoff might want, after reading Chapter One, to skip to our analysis of evidentiary issues, starting especially in the last section of Chapter Five and on through Chapter Six, to Chapter Seven’s description of the dizzying range of situations where promissory fraud can arise or to Chapter Eight’s discussion of the crime of false promise. Our Appendix “Prestatement” of the law presents our normative bottom-line in a nutshell. For the more theoretically inclined, Chapters Two, Three and Four present an analysis of just what insincere promising is and of why the law should concern itself with it. In our emersion to the case law, we have been aided by a number of able Yale law students, including David D’Addio, Benjamin Alarie, Susanne Augenhofer, Ryan Bergsieker, Sara Van Dyke, Jordan Factor, Sydney Foster, Benjamin Hance, Winter King, Praveen Krishna, Alex Lee, Ying Ying Li, Kevin Reed, Blake Rohrbacher and Steven Wu. We thank both Tony Kronman and the Olin Foundation for financial support. Over the years we have repeatedly benefited from the comments of Dick Speidel, Carol Rose, Rob Gertner, and Lea Brillmayer and we are also grateful for the helpful comments on this manuscript that we have received from Barry Adler, Richard iii Craswell, Kevin Davis, Jason Scott Johnston, George Triantis as well as participants from the Wisconsin Conference on Freedom from Contract and the Yale Summer Olin seminar series. The Office of the New York Attorney General graciously permitted Greg Klass to publish this book while employed there, on the condition that we make clear that the views expressed in the book are not necessarily those of that office. Finally, we must thank our families, without whose many forms of support this book would not have been possible. iv Table of Contents CHAPTER I. INTRODUCTION..........................................................................1 CHAPTER II. HOW TO SAY THINGS WITH PROMISESERROR! BOOKMARK NOT DEFINED. CHAPTER III. FALSEHOOD AND RESPONSIBILITYERROR! BOOKMARK NOT DEFINED. CHAPTER IV. WHY PROMISSORY FRAUD?ERROR! BOOKMARK NOT DEFINED. CHAPTER V. THE REPRESENTATION INQUIRY: WHAT DOES A PROMISE SAY? .......ERROR! BOOKMARK NOT DEFINED. CHAPTER VI. THE VERACITY AND SCIENTER INQUIRIES: EVIDENCE OF FALSITY AND EVIDENCE OF CULPABILITY.............ERROR! BOOKMARK NOT DEFINED. CHAPTER VII. THE LANDSCAPE OF PROMISSORY MISREPRESENTATIONERROR! BOOKMARK NOT DEFINED. CHAPTER VIII. FALSE PROMISE: INSINCERE PROMISING AS CRIME...........................ERROR! BOOKMARK NOT DEFINED. CHAPTER IX. TEACHING PROMISSORY FRAUDERROR! BOOKMARK NOT DEFINED. CHAPTER X. CONCLUSION .............ERROR! BOOKMARK NOT DEFINED. APPENDIX A: A DRAFT PRESTATEMENT OF THE LAW OF INSINCERE PROMISINGERROR! BOOKMARK NOT DEFINED. APPENDIX B: PROMISSORY FRAUD ABROADERROR! BOOKMARK NOT DEFINED. v Chapter I. Introduction You sit down in a diner, peruse the menu for a few minutes and, when the waiter arrives and wishes you a good morning, you respond in kind and then say, “I want two eggs over easy with hash browns and rye toast.” According to the dictionary meaning of your words, you have just reported to a fact about your appetitive state. But of course what you have really done is order breakfast. The salient question in the situation is not your feelings towards this or that item on the menu, but what the waiter shall bring. Your words decide that. What you’ve said is also a type of promise. In context, the statement works as an implicit conditional promise: If you bring me these things, I will pay for them. Such implicit promises are standard fare in the first-year Contracts curriculum. Students similarly learn that by representing a fact, a contractual promisor implicitly warrants that the representation is true. The dictionary meaning of the words is correct, and perhaps even intended, but it does not reveal the complete use to which those words are being put. While legal thinkers are well acquainted with the idea that statements of fact can be implicit promises, not much attention has been paid to the converse – that often enough, the act of promising not only puts the speaker under an obligation, but represents something to be the case. A central thesis of this book is that to promise to do something is, in most cases, a multidimensional act, and that the law of contracts would do well to recognize its different meanings. The dictionary meaning of the words “I promise to…” 1 is that the speaker, by uttering them, puts herself under a certain obligation – an obligation to do the act promised. Philosophers of language sometimes refer to such speech acts as “performatives,” since by the very uttering of the words one performs some act.1 But just as the dictionary meaning of “I want two eggs over easy” masks those words’ performative force when uttered to a waiter, so the obvious performative force of a promise can obscure what it says about the world. In most (though not all) contexts, a promise to do something also represents that the promisor intends to do that thing. And, we will argue, many promises say even more than this about the likelihood that the speaker will do the act promised. As the statement to the waiter both says something about one’s dietary preferences and does something about ordering breakfast, so a promise can both do something, by putting the speaker under an obligation, and say something, by representing that she intends to do the act promised, that there is a certain probability that she will perform, and perhaps more. Most legal and philosophical accounts of promising emphasize what promises do at the expense of what they say. This is not surprising, since it is their performative force that sets promises apart as particularly interesting sorts of speech acts. Philosophers find it endlessly fascinating that by the mere act of uttering certain words one can create a duty for the speaker. Legal thinkers are faced with the more pressing practical problem of whether, why and how the law should take cognizance of such duties. 1 Most influentially, J.L. Austin, How to Do Things with Words (J.O. Urmson & Marina Sbisà eds., 2d ed. 1975). Austin distinguishes performatives – thanking, naming, apologizing, promising – from constatives, which are assertions about the world and which we generally refer to as the “representational” dimension or as what a speech act “says.” 2 The representational dimension of promises has not been completely overlooked. Legal theorists who have attempted to reduce the law of contracts to the principles of torts, including Grant Gilmore and P.S. Atiyah, have characterized promises as predictions about what the speaker will do in the future.2 But these accounts generally make the opposite mistake, emphasizing what promises say at the expense of what they do. As such, they are as philosophical accounts of promising deeply unsatisfactory. And as attempts at legal reforms they have generally failed. This book examines the legal relevance of the representational dimension of promising – the fact that promises often say something about the world. But it doesn’t deny the primacy of a promise’s purely performative aspect – the fact that by promising, one puts oneself under a certain obligation. We are not revolutionaries. We accept that most of the law of contracts is best viewed as playing a supporting role in the way that promises create obligations and we believe that this is proper. But we are reformers. Promises also convey information – especially information about the promisor’s intentions with respect to performance and, more generally, about the probability of her performance. The law can and should be structured to support such transfers of information. 2 Grant Gilmore, The Death of Contract 61-93 (1974); Patrick Atiyah, Promises, Morals, and The Law 138-215 (1981). Farnsworth, who does not fall into such reductionism, also observes that the act of promising has two separate dimensions: First, a promise represents that the promisor has made an initial decision to do what is promised. A promise to do thus-and-so says: “I have decided to do thus-and-so.” … Second, a promise expresses the promisor’s commitment to carry out the initial decision by doing what is promised at some future time despite a subsequent change of mind. A promise to do thus-and-so also says: “I will carry out my decision to do thus-and-so when the time comes even if I later change my mind and regret my decision to do it.” E. Allan Farnsworth, Changing Your Mind: The Law of Regretted Decisions 29 (1998). Farnsworth’s emphasis in his book, however, is on the second dimension he identifies – the way that a promise expresses (or creates) a commitment – and he doesn’t have much to say about the first.

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